spicy ipWe have an interesting ‘ghost post’ by a lawyer who practices with an IP law firm on the various ways in which the Copyright Amendments of 2012 can be circumvented. SpicyIP has previously covered some of the petitions that have challenged the constitutionality of the amendments here, here, here and here.

image from here

The myriad ways in which the Copyright Amendment Act, 2012 is being circumvented

Once upon a time, the film industry functioned on mutual trust; agreements (if any) were a mere formality.  With growing modes and mediums of exploiting works (particularly the ringtone royalties) came a time when some authors felt that they were being exploited by the music labels. They found a leader who fought for their rights with which came one of the most ambiguous amendments this country has ever witnessed, ‘The Copyright Amendment Act, 2012’. Six petitions challenging the Amendment have already been filed and there are many more to come. Thanks to our draftsmen, the Amendment has been drafted with such loopholes that the music labels are still able to find their way to circumvent the Amendment. Few glaring ones are encapsulated below:

1.  Advance Royalties-

While the legislative intent seemed to be that authors should receive their royalties from registered copyright societies which would in a transparent manner distribute the royalties to the authors in accordance with the Tariff Scheme and Distribution scheme laid by them, unfortunately, the amendments to Section 17,18, 19 and 33 do not provide clarity on this intent. There is no restriction on assignment of copyright in works under Sec. 14 and performers rights under Sec 38 & 38A. What is not assignable is the right to receive royalties to be paid on an equal basis. However the Amendment fails to explain as to what would this share on an “equal basis” be?  “Share on an equal basis” (as provided in Sec 18 amendment) is not necessarily the same as “equal share” (as provided in Sec 19 amendment). In the event the Courts are unable to infer the actual intent of the legislature from the language of the statute, the statute could be held to be void to that extent. Taking advantage of the ambiguous language in which these sections are worded, the music labels have come up with the concept of advance royalties, few instances captured here and here. As per the newly inserted provisos to Section 18, the author’s right to receive royalties on an equal basis (which is an actionable claim i.e. the failure to pay royalties would only create a claim to recover money/royalty) in literary and musical work incorporated in cinematograph films and sound recordings can be assigned only to his legal heirs or to a copyright society. However nothing restricts the author from directly collecting these royalties from the producer (assignee of the work). Further, while administering the right to receive royalties, if the author chooses to accept an advance against it from the producer, there is nothing in the statute restricting him to do so. Such clauses typically provide that the author shall receive from the producer his share, being 25% of the publishing royalties (pro-rata with other authors of literary and musical works in the films). An “x” amount is given to the author as an advance royalty towards the author’s share of publishing royalties with a promise to pay the balance share once the producer has recouped his expenses. In the absence of a copyright society monitoring these accounts of inflow of money by exploitation of publishing rights, it would be very easy to manipulate the figures and in many cases such authors would never see the royalties flowing into their accounts. In my view, the concept of advance royalties defeats the entire legislative intent behind bringing this Amendment and must be dissuaded if the industry needs to function in a healthy manner

2.     Back dated agreements-

Since the Amendment Act does not provide for repeal and savings, the legislative intent does not seem to make this Amendment retrospective in operation. By default, Section 6 of the General Clauses Act, 1897 would therefore apply. Therefore where works were created before the 2012 Amendment , the rights that accrued by law to the author would be in accordance with the law prevalent at that point of time and the amendments introduced by the 2012 Amendment obviously would not constrain the author of such work. The general principle is that amendments are not retrospective unless specifically made so, is subject to one exception as observed by the Supreme Court in few cases i.e. where the statute is purely declaratory or clarificatory in nature. To circumvent the amendments introduced by Sec. 18 and 19 providing royalty rights to the authors, many back dated agreements are being entered dated before 21st June, 2012.  However, some in the industry consider the Amendment to have retroactive application i.e. irrespective of the date of the agreement, the royalty rights will apply to any utilization of the author’s work after the Amendment has come into force.

3.     Waiver of performers royalty rights

We have been reading plenty of articles capturing the tussle between the music labels and the performers / composers covered here and here.  While this issue has been discussedhere  and here it is important to ask the question as to why would the Legislature provide for royalty rights to performers if the same could be taken away. The practice is to take waiver and assignment from the ones who have no bargaining power. It is pertinent to note that none of the petitions challenging the Amendment have challenged the amendments to the sections dealing with performers rights, which but obviously seems to be a strategy to take advantage of the ambiguous position of law.

We have waited for over a year to see the Amendment get implemented, seems like we will have to wait for few more years till there is a Supreme Court judgment clarifying the legislative intent. It won’t be long before the authors of artistic and dramatic works like choreographers, set designers, costume designers, etc wake up and realize that even they are entitled to receive royalties which they are happily waiving away.

As per the IPRS Annual Report of 2012-13, IPRS had submitted its form for re-registration on 10th May, 2013 which application still remains pending. There is no information provided either by the Copyright Board nor by the Government as to what happens with the royalty disbursement to the authors in this interim stage till the societies get re-registered. The film industry has had issues with service tax, entertainment tax and other taxes, the brunt of which is often on the producers, however the industry has lived with it as these statutes are relatively less ambiguous. Had the Government been vigilant enough to clarify and distinguish terms like publishing royalties,  master royalties, the ratio and the manner in which the royalties are to be distributed, the nature of royalty rights (assignable/ non assignable), application of the Amendment etc, we would have had a healthily running film industry.

The original was published here

This post has been republished with permission.